Canada Extends Review of Cnooc Takeover Bid for Nexen

Nov. 3 (Bloomberg) -- Canada has extended its review of
Beijing-based Cnooc Ltd.’s $15.1 billion takeover of Nexen Inc.
for a second time, re-setting the deadline to Dec. 10.

Prime Minister Stephen Harper’s government began its review
of the bid for the Calgary oil and gas producer under the
country’s foreign-takeover law after it was announced on July
23. On Oct. 11, Industry Minister Christian Paradis said he
extended the review by 30 days.

“Extensions to the review period are not unusual,”
Paradis said in a statement that was e-mailed late yesterday.
“The proposed transaction is undergoing a rigorous review under
the Investment Canada Act.”

“A determination will be made based on the six clear
factors that are laid out in detail in section 20 of the Act
band the Guidelines on Investment by State-Owned Enterprises,”
Paradis said in the statement. “The required time will be taken
to conduct a thorough and careful review of this proposed
investment.” Under the law, Beijing-based Cnooc had to agree to
the deadline extension.

Harper, who begins his third trip to Asia this year when he
arrives in India tomorrow, has said he wants to rely less on a
sluggish U.S. economy for exports and ship more energy to fast-growing Asian economies. Canada relies on exports for about one-third of its gross domestic product, with about three-quarters
of its foreign shipments sent to the U.S.

‘Policy Framework’

Natural Resources Minister Joe Oliver has said the
country’s biggest resource projects will require nearly C$650
billion ($653 billion) of investment to develop over the next
decade. Harper has said he would clarify Canada’s foreign
investment rules in a “policy framework” to be released when
the government decides on the Cnooc’s bid -- the largest foreign
acquisition by a Chinese company.

Paradis blocked a C$5.2 billion bid by Petroliam Nasional
Bhd. for Calgary-based Progress Energy Resources Corp., issuing
a statement minutes before midnight on Oct. 19 in Ottawa that
said the transaction didn’t represent a “net benefit” for the
country. It was only the third time Canada has blocked an
acquisition under its foreign-takeover law since the legislation
took effect in 1985. Petronas, as Malaysia’s state-owned oil
company is called, was given 30 days to appeal or make
concessions.

Investors Uncertain

Shares of Nexen closed at $24.64 in New York yesterday, 10
percent below Cnooc’s offer price of $27.50, suggesting
investors are uncertain the deal will be completed.

Harper has said Canada’s trade and investment with China
should be more balanced. “The Chinese are acutely aware, in my
own experience, of the fact the trade and investment flows are
disproportionately in their favor,” Harper said in an interview
with Bloomberg Television’s Erik Schatzker Sept. 6. “They
recognize that has to change,” he said, adding “we will also
be seeking things from them.”

Harper has also said he knows that many Canadians are
uneasy about deals such as Cnooc’s. Fifty-eight percent of
Canadians believe the government should block the Nexen
takeover, according to an online poll of 1,000 people taken Oct.
10 to Oct. 11 by Angus Reid Public Opinion. The main opposition
in Parliament, the New Democratic Party, has opposed the bid.

Beijing-based Cnooc has already made several commitments to
Canada to win support for the Nexen sale. These include listing
its shares on the Toronto Stock Exchange, establishing Calgary
as its base for North and Central America and maintaining
Nexen’s employment levels and capital spending program.